“God Save The Canadian Dollar”

“God Save The Canadian Dollar” by $hane Obata and Triggers

"God Save The Canadian Dollar"

The Canadian Dollar has fallen 23% against the US Dollar since Valentine’s Day of 2013. Is the worst over? Or is there more pain to come?

The Bull Case

This Tiger Cub Giant Is Betting On Banks And Tech Stocks In The Recovery

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There are a few reasons why the CAD might rise:

Regardless, the short thesis is more convincing…

The Bear Case

To Hike Or Not To Hike?

The market is pricing in a rate hike in just over 5 months:

Canadian Dollar

As a result, near-dated yields are rising…

The Yield Curve

The Treasury yield curve is flatter than it was about a year ago:

Canadian Dollar

The short-end is convinced that the Fed will move in 2015…

…The long-end is worried about slowing growth and about deflation…


The US dollar is appreciating because of rising short term rates:

Canadian Dollar

This is not good for energy, metals, etc., which are priced in USD…

Commodity Prices

Dollar strength is translating into commodity weakness:

Canadian Dollar

Thus, resource exporters such as Canada are under pressure…

Weak Economy, Weak CAD

Falling energy prices are negatively affecting Canada’s economy:

Canadian Dollar

Canadian Dollar

Industries that are not based on commodities are doing alright. But will it last???


USDCAD – Monthly Chart

USDCAD is trading at 1.30280; the highest it has been since March of 2009:

That said, it is still far away from 1.61840 (purple X); the all-time high set in January of 2002…

USDCAD – Weekly Chart

If USDCAD breaks up through trend line resistance at 1.30634 (blue X) then could rise to 1.38802 by the end of Q2, 2016:

On the other hand, if it breaks down through trend line support at 1.28313 (blue Y) then it could fall to 1.26215 by early-mid September…


There is a high probability that the CAD will continue to depreciate. In addition to everything we covered, Canada’s monetary policy is likely to remain loose. Moreover, a technical recession may lead the BOC to cut rates again this year. Finally, ask yourself one question: What will happen to the CAD if and when the Canadian housing market rolls over???

Disclaimer: This analysis should not be interpreted as investment advice.